Distribution Events
There are several ways to get your balance out of your retirement plan.  Each plan has it’s own set of guidelines so all options may not be available.  It is best to check you summary plan description or speak with your employer if you think you qualify for one of the following distribution events:

1. Severance from employment
2. In-Service
3. Hardship
4. Loans

Severance from employment
A severance from employment occurs once your employer no longer employs you.  At this point, the plan has several options for paying out a participant, depending on the guidelines in the plan document.  Most plans pay out as soon as practicable in the year following termination.  That means that if you have a calendar year plan, you should expect to get your distribution paperwork in the summer of the following year.  Other plans may pay immediately.  In this case, you can expect to get your paperwork right away.   When the plan was designed, the trustee decided on the guidelines they thought best for the company and the participants.  You should consult your summary plan description or speak with your employer to determine your plan’s distribution timing.

In-Service Distributions

Your plan may allow in-service distributions at normal retirement age, disability or death.  Plans vary greatly on what funds are available for in-service distributions and the requirements to take one.  You should consult your summary plan description or speak with your employer to determine if this option is available to you.

Hardship

Some retirement plans allow for hardship distributions.  A hardship is determined by the following IRS regulations:

1. Unreimbursed medical expenses – for yourself, spouse and dependents
2. Purchase of primary residence
3. Tuition for post secondary education
4. Prevent eviction or foreclosure from primary residence

Hardships are normally restricted to the deferrals you put into the plan.  In the event you need a hardship, your deferrals will have to be suspended for six months following.  In addition, a 10% penalty will be imposed in addition to other taxes unless you have attained age 59 ½ or are buying a primary residence.

If your plan allows distributions due to financial hardship, you must first exhaust all resources outside the plan, then obtain all distributions and non-taxable loans currently available under the plan before requesting a hardship distribution.
 

Loans

Your retirement plan may allow for plan loans.  The maximum loan you can take is the lesser of 50% of your vested account balance or $50,000.  A loan from the plan must be repaid within 5 years making at least quarterly payments.  Most employers use payroll deduction to help you avoid any missed payments.  If the loan is not repaid in full, tax penalties will apply.

How do I request a distribution

To request a distribution, you simply need to let your employer know what kind of distribution you want.  They will contact Miles and Associates, Inc. to start the paperwork.  You will normally get the paperwork for your distribution within one week.   Once it’s completed, either you or your employer will return it to Miles and Associates, Inc.  At that time, we will prepare the necessary forms for the broker or investment company to release your funds and send to the plan trustee.   The plan trustee will sign any applicable paperwork and forward on the investment company or broker.  The entire process normally takes a few weeks to a month to complete.

Taxation

Distributions from plans are taxed on both the federal, and in most cases, the state level at the regular income tax level.  Withholding of  20% federal tax and a 4% North Carolina state tax applies to all lump sum distributions not rolled over.  This offsets the taxes due when completing your tax return at year end.   In addition, a 10% penalty is applied when you file your income taxes if you are not age 59 ½. 

To avoid taxation, a distribution can be rolled into another qualified plan or into a traditional IRA.  This will delay taxation, allowing your money to continue to grow, until you decide to withdraw the money at a later date. 

You will receive a Form 1099-R in January or early February of the following year to use to report your distribution on your personal tax forms. 
 

How do Miles and Associates, Inc verify my distribution is correct?

If you are in a 401(k) plan, each year, Miles and Associates, Inc. compares the deposits made by your employer to the amount reported on your W-2.  In addition, we verify that the employer has correctly calculated and depostied any matching contribution based upon your deferrals.  For plans with other types of employer contributions we verfy deposts were made based upon the requirements for the applicable plan year.  When a distribution is requested,   we audit  your account again to ensure all funds due to you are in your account and we verfiy the vested percentage to quarantee that you are receiving the funds due to you..  Any problems are brought immediately to your employer’s attention and corrected prior to any disbursement.